Daily budget constraint and calculating reservations wage

Reference no: EM1311654

Shelly's preferences for consumption and leisure can be expressed as

U(C,L)=(C-200) X (L-80)

This utility function implies that shelly's marginal utility of leisure is C-200 and her marginal utility of consumption is L-80. there are 168 hours in the week available to split between work and leisure. shelly earns $5 per hours after taxes. she also receives $320 worth of welfare benefits each week regardless of how much she works.

A. graph shelly's budget line
B. what is shelly's marginal rate of substitution when L=100 and she is on her budget line?
C. what is shelly's reservation wage?
D. find shelly's optimal amount of consumption and leisure.

Reference no: EM1311654

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